A Taxing Problem

How powerful are tobacco interests in North Carolina in 2002?

Given that the core of the industry now makes up only 4.5 percent of the state's economy, you'd think the answer would be: Not very.

But in the political arena, its power lingers like phantom pain after an amputation. As a result, policies seen as harmful to tobacco are often cut out of legislative debates.

Take sales taxes on cigarettes in North Carolina, which at 5 cents a pack, are the third lowest in the country. Raising those taxes is a dead issue, legislators say, even though many other states are using those revenues to fund smoking-prevention programs.

"Increasingly in other states, the effort to raise cigarette excise taxes is tied to preventing young people from being able to afford a pack of cigarettes," says state House Rep. Paul Luebke (D-Durham), a longtime proponent of state tax reform. "That debate hasn't occurred here. Instead, it's perceived as hitting tobacco farmers while they're down."

If higher-than-average teen smoking rates aren't enough to inspire North Carolina lawmakers to raise cigarette taxes, what about homeland security?

Last year, federal investigators uncovered a cigarette smuggling operation in Charlotte whose members have recently been charged with violating anti-terrorism laws.

Federal investigators say the ring worked like this: Members, mostly Lebanese immigrants, bought cigarettes in North Carolina and illegally transported them to Michigan, where the sales tax is 75 cents a pack. They planned to use the money they made for stun guns, metal detectors, radar equipment and other support for the Lebanese-based Hezbollah, which is on the U.S. State Department's list of terrorist organizations.

After a crackdown tagged "Operation Smokescreen" uncovered the operation last year, Charlotte businessman Said Mohamad Harb was charged with cigarette smuggling, money laundering and anti-terrorism violations. Eight other members of the alleged ring have been charged with breaking racketeering laws.

So what are the chances North Carolina will raise the tax on its packs?

Despite decades of unsuccessful lobbying on the subject, "I think it's inevitable that it will happen here," says Deborah Bryan, director of programs and government relations at the state chapter of the American Lung Association. "We've raised taxes on alcohol and phone calls. And here we have something that's leading to illegal theft."

Health-trust money approved for prescription drug program: $35 million annually for three years
Amount CDC recommends as a minimum for statewide smoking prevention: $42.6 million
Amount proposed by N.C. health groups: $25 million
Amount proposed by health trust commission: $5 million

Number of kids who will start smoking in N.C. this year: 24,200
Percent of N.C. high school students who smoke: 38%
Nationally: 28%

Number of deaths caused by tobacco each year in N.C.: 11,642
Amount of state money spent on health care for sick smokers: $200 million
Total health-care costs of smoking: $1.2 billion
Tax per pack of cigarettes in N.C.: 5 cents (third lowest)

Sources: Federal Centers for Disease Control and Prevention; N.C. Health Department; National Campaign for Tobacco-Free Kids